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Legal Note - from Withholding Retention under new Public Contracts Code § 7202
California Contractors – a newly enacted law has barred the Department of Transportation / Cal-Trans from withholding retention from progress payments for contractors working on transportation projects. This was enacted by former Senate Bill 593 which became Public Contracts Code Section 7202.
The bill did not change Public Contracts Code Section 7200 which stated a general contractor could not withhold more than the retention percentage stated in its prime contract from each subcontractor, except when the solicitation of bids requires subcontractor bonding and the bond is refused to be given or is not issued by an admitted surety. Unless this bonding exception applies, then as a result under the new Section 7202 a general contractor cannot withhold retention on progress payments from its subcontractors, since retention is no longer being so withheld by Cal-Trans.
This new law took effect on January 1, 2009, and will be repealed on January 1, 2014 unless renewed or extended by law. This new provision will likely require revisions to the standard subcontract forms that general contractors are using for Cal-Trans projects. If you have any questions on the application of this new law as a contractor or subcontractor, please consult with an experienced construction attorney.
San Francisco, CA
Updated Friday, December 18, 2009 10:53 AM
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